Credit insurance programs have been sold to consumers for over 100 years. Consumers pay a premium in exchange for insurance coverage that promises to pay all or a portion of a loan balance or minimum monthly payments in the event that the purchaser experiences a hardship brought on by any one of a number of named life events such as death, disability or unemployment.
Debt suspension and debt cancellation programs (debt protection programs) were more recently introduced by lending institutions that wanted to provide consumers with benefits substantially similar to those available under a credit insurance policy, but through a modification to their lending agreement. These programs became more widely available to consumers through credit card issuing banks in the late 90's but were originally disclosed by the OCC as an option in 1964. Today, debt protection programs are offered by most major credit card issuers.
Additionally, both of these types of products are offered to customers in connection with the extension of credit associated with a specific loan transaction. The products are offered by each individual loan originator. As a result, consumers who wish to secure coverage for all of their loan obligations must respond to offers from each loan originator or servicer. In some cases, the products may not be available or the coverages and terms may vary by lending institution.
Some insurance companies and lenders have attempted to create insurance and debt protection programs that pay benefits beyond a minimum monthly benefit or the outstanding loan balance associated with a particular loan. For example, one program promises to pay customers a fixed benefit based on their coverage selection, to cover other loan obligations. Another program, distributed through employer groups, promises to provide the consumer with fixed benefits that would replace all or a portion of the customer's income so that the customer can pay for food, utilities and loan payments.
Under currently available models, the cash provided to the customer represents the benefit of the program. The insurance companies or the lenders have no expectations of repayment. Consumer studies suggest that these benefits are greater than what customers need to satisfy the financial hardships brought on by the events these programs are intending to cover. As a result, the premiums that a customer must pay to secure this type of coverage are often prohibitively high.
As an alternative to the programs discussed above, consumers might seek assistance from banks in the form of a loan during periods of financial hardship. However, it is well understood that banks will not typically provide unsecured loans to consumers during periods of financial hardship due to loan underwriting restrictions and/or sound business practices. Those who might lend monies under these circumstances typically do so at extraordinarily high rates that serve to create additional hardship for the consumer.
Systems according to various embodiments of the present invention are configured to facilitate the implementation of a plan that provides consumers with the cash they need during periods of financial hardship, but with lower associated premium payments.